Farmers feeling the pinch at the pump

Stephanie Jeter | May 26, 2004

COLLEGE STATION, Texas – National gasoline prices set a record high this week and farmers are feeling the pinch at the pump, Texas Cooperative Extension reports. According to Stanley Bevers of Vernon, Extension economist, the producer who is planting is the one most affected by rising fuel costs.

"Cotton, corn and peanut producers are getting hit pretty hard (with high fuel prices) because right now, it's a necessity for their operation," Bevers said. "They have to ‘fill-up' and plow the fields."

According to Bevers, a tractor can burn from 8 to 20 gallons of fuel an hour. "The average varies greatly depending on what the producer is doing," he said. "That large amount of fuel results in a large bill."

Fertilizer is another big cost that rises with fuel prices.

"Fertilizer price is a function of natural gas prices," Bevers said. "Farmers have experienced a 20 percent to 30 percent increase in the price of fertilizer.

"Natural gas (a main component when producing fertilizer) is part of the energy complex, therefore when other energy prices increase, their prices follow suit." Bevers said.

Harvesters are feeling the demand for more of their dollars and cents as well, he said. "I expect to see custom harvesting prices go up in order to cover fuel costs."

According to the U.S. Department of Energy's Web site, gasoline prices rose to a nationwide average of $2.06 for a gallon of regular on Monday. The jump equals an increase of nearly 5 cents since last week and 58 cents from the same time 2003. Diesel prices are $1.76 a gallon, up nearly 33 cents from last year.

C. Parr Rosson of College Station, Extension economist specializing in international trade, said the price increase is a result of several factors that occurred all at the same time. He explained it as a function of supply and demand.

"Demand in the United States is up, and our supplying power has not increased," he said. "We're looking at a situation where demand has been growing, yet supply is limited because of a lack of refineries."

The actual oil is not lacking, causing the price increase, Rosson said. What is lacking is the ability to refine it into useable products.

"We import crude oil and then refine it," he said. "There hasn't been a refinery added since the 1970s."

According to Rosson, the freeze of new refineries is a result of increased regulation and higher costs.

"Over time, we will see an increased amount of imported refined products, improved capacity to refine oil, and even alternative energy sources like hybrid vehicles," he said.

Bever said producers have been able to ride the price storm successfully.

"Agriculture has been fortunate to see high commodity prices. Beef prices are at a record high, and corn is getting more than in the past," he said. "Producers are hoping that the prices hold until payday comes at harvest."

According to Bever, growers can save on gasoline prices in many ways, but not in all operations.

“Farmers can change to a no-till or conservation-till method and save on gas money, but it's very tough to change a system," he said.

"This isn't the first time fuel prices have gone up and it probably won't be the last time."

The earliest possible price relief for producers will come in the fall.

"We're approaching the summer months when people are driving and air travel has picked up," he said. "It's not a long-term fix, but producers should see a price decrease once summer demand goes down."